Trump: Not Inevitable But Getting Closer

Well, Super Tuesday has come and gone, and the defining aspect of this race remains the same: Donald Trump is the overwhelming frontrunner to be the Republican nominee. That said, Senator Ted Cruz had a surprisingly strong night, carrying 3 states (TX as expected but OK and AK were a bit surprising). Senator Marco Rubio did manage a win in MN, but it otherwise was a dour night for him. Governor John Kasich nearly stole Vermont, had a 2nd in Massachusetts, and took critical votes in Virginia but was barely relevant in the South. As expected, Dr. Ben Carson barely took any delegates and is exiting the race. Here is how the delegates seemed to break (note things are not finalized and Trump could be anywhere between 240 and 260 with Cruz anywhere between 205 and 225) and updated probabilities.

st delegates

odds

As you can see, from a delegate perspective, Trump performed in-line even though I thought he would get 9 or 10 states rather than 7. His strong delegate performance was fueled by Rubio’s inability to meet thresholds in TX, VT, and AL as well as larger than expected wins in TN and GA. These factors buoyed his results despite losses in OK and AK. By missing those thresholds, Rubio fell significantly short in the delegate count, and much of his underperformance mirrors Cruz’s outperformance.

However, moving forward, Trump is clearly in the driver’s seat. I struggle mightily to see a scenario where a candidate other than Trump claims the 1,237 delegates needed to clinch the nomination, though I can still see the other candidates getting enough delegates together to block Trump from getting to 1,237 (though a finish below 900 would seem very unlikely). Yes, compared to what we were expecting 72 hours ago, Cruz had a good night. However, if we were told he won 3 states 1 month ago, that would have been disappointing because it is unclear what upcoming major states Cruz can beat Trump in 1 on 1. Super Tuesday is as good as it gets for Cruz. States like NY, NJ, PA, IN, and much of CA fit Trump better, even if the race narrowed. Cruz will continue to win a fair share of delegates, but to have a credible chance, he really needed to be the delegate leader. His path to the nomination is still hard to see, apart from some deal at the convention.

Similarly, Kasich is well positioned to compete in his state of Ohio and take the 66 delegates, but getting to a majority is hard to envision and is certainly dependent on Rubio losing Florida and dropping out on the 15th (note: I have donated to the Kasich campaign). Kasich must win Ohio, and if he does, he can accumulate more delegates in the North and Midwest to help block Trump. If Rubio loses FL, he could be the last, best hope against Trump and with enough wins, get enough delegates to take the nomination in a floor fight in Cleveland. The odds are long.

That leaves us with Rubio. He is so far back in the delegate count, he will basically need to win 2/3 of the remaining delegates, which is extremely unlikely. However, upcoming states are a far better fit for him than Cruz, and he is better funded than Kasich. In the event of a contested convention, there is a very good chance he is the nominee. However, his home state of Florida is a must-win for him, and polling shows him at least 10% behind. Early voting is also showing a substantial number of new voters, which is a positive for Trump. Losing those 99 delegates to Trump (it is winner take all) would give Trump an excellent shot at claiming 1,237 and be a devastating defeat to the Senator.

Expect Florida to be a war of attrition like 2012 with millions spent on TV ads (and the cavalry is coming with a heavily funded anti-Trump Super PAC hitting the airwaves), days of campaigning, and brutal attacks. Rumors continue to swirl Governor Rick Scott will endorse Trump, which would further lengthen Rubio’s odds. Florida is do or die for Rubio. If he wins (maybe a 25-33% shot at this point), he would suddenly be relatively well-positioned to take on Trump, but a loss is game-over. If Kasich were to lose alongside Rubio that night, the battle for the nomination would be effectively over with Trump able to run out the clock until he formally clinched it. Rubio is in a precarious position: the poor Super Tuesday showing makes getting an outright majority of delegates very difficult and forces him to come from behind in FL.

While Tuesday was in-line for Trump, he benefitted from the fact Cruz outperformed at Rubio’s expense, giving Cruz the rationale to stay in the race and continue splitting the vote. In future states, Rubio is more dangerous than Cruz, so Trump is happy to have Rubio further back in the delegate race. One cannot wonder if Rubio’s childish attacks on Trump backfired a bit. They may have succeeded in bringing down Trump but did some of those voters go to Cruz (who stayed above the fray to a degree) instead of Rubio? When you mud-wrestle, everyone gets dirty and the third person can benefit. Expect fireworks at the Thursday debate because the other candidates need to find a way to stop Trump by the 15th. If not, it will almost certainly be too late.

So that is how I see the race. Agree? Disagree? Let me know here or on Twitter!

Advertisements

South Carolina Primary Predictions and Thoughts

Well, the first in the South primary, South Carolina, is upon us, and public polling has added a bit of uncertainty to the race. While most polls had been showing Donald Trump with a commanding 15+% lead, others since the debate show a less than 5% lead (perhaps his George W. Bush attack did have ramifications). Senators Marco Rubio and Ted Cruz appear to be battling for 2nd and 3rd, though some polls have also shown Governors Jeb Bush and John Kasich with a potential shot at 3rd while Dr. Ben Carson has been languishing. Below are my predictions as well as what each candidate needs to achieve to consider the night a success.

 

Donald Trump: Trump is the national frontrunner and every candidate would trade places with him. Given all the polls showing him up 10+%, a loss in SC would be a major surprise and setback but not enough to totally derail his candidacy as he would still likely place well with numerous victories across the South on March 1. A win in SC would really solidify his standing and give him momentum to nearly run the table March 1 (it is hard to see him win TX at this point). My guess is the polls showing him up 15% are overstating things and he likely wins by about 10%. At that point, it very much becomes Trump’s race to lose with a chance to take a commanding delegate lead and a head of steam after the SEC Primary, though if the field narrows to 2 after the 15th all bets are off. I would expect Trump to win tomorrow with the operative question “by how much.” I guess 9%.

Marco Rubio: Rubio has seemingly rebounded from his NH debacle thanks to a strong ground game, solid debate performance, and key endorsements from Rep. Trey Gowdy, Sen. Tim Scott, and Gov. Nikki Haley. With that popular trio, Rubio should be finishing very strongly in SC, even if NH derailed the “3-2-1” strategy (now it’s the less catchy “3-5-2/3”). The Rubio/Cruz battle for 2nd/3rd is very close, but Rubio appears to be the candidate with the momentum. These endorsements have given Rubio the shot he has at 2nd but raise the bar for success. 2nd place leaves Rubio in a very good position to consolidate the “establishment” and “center-right” lanes, become the clear anti-Trump choice, and win a few states (perhaps NV?) before picking up Florida’s 99 delegates the 15th. A solid 3rd gives Rubio some momentum and still leaves him the clear choice in anti-Trump circles. The problem for Rubio would arise if he came in a weak 3rd (say 15%). If that’s all he can muster with the institutional support he has in SC, it will raise reasonable concerns about where Rubio can win. A weak showing could let Bush continue, siphoning off votes on March 1, while leaving the anti-Trump part of the party fractured. In the worst case, Rubio, without any SC momentum, goes winless on the 1st and 8th, leaving him vulnerable to losing to Trump in FL, ending his bid. My base case is 2nd for Rubio, but he has to perform tomorrow, if he drifts much below 17%, yellow lights will be flashing.  15% is my benchmark for failure, which is not my expectation.

Ted Cruz: Cruz like Rubio needs a strong showing, and while I see him in a close third, his fantastic ground game could still get him in 2nd. The fact is Cruz needs to crush it on March 1 because the map gets very unfavorable after that. He should win big in TX, which could net him 100-120 delegates, but he needs some wins elsewhere in the South to wrest the anti-establishment crown from Trump as places like MI, OH, MO, FL, WI are unlikely to be as favorable as AL, TN, OK, and GA. If Cruz can’t win in the South, it is unclear where he could thereafter. A bunch of second place finishes to Trump would give him plenty of delegates and a chance in a brokered convention but would leave him with a challenged path to winning outright. Cruz needs to walk out of SC with some momentum so that he can challenge Trump on March 1. A win certainly would do that but seems unlikely. 2nd also leaves him with a decent shot, though he will need a good week campaigning and solid debate performance to hold Trump back. A 3rd place finish leaves Cruz in a weakened position, and something closer to 15% than 20% would be very problematic (though that seems unlikely). For Cruz to have a credible shot at the nomination, he likely needs to be the delegate leader after March 1. A weak SC showing makes that tough to envision.

Jeb Bush: Bush needs a top three finish to justify continuing his campaign. Besides running low on cash at the campaign level, he may not have much of a choice about how much longer he continues. After making SC a make or break state and bringing in his brother to campaign for him, a loss to Rubio would be very disappointing and lead to even more of a donor exodus. If he can beat Rubio, Bush will be able to stick around, though it is unclear when Bush would actually be able to win a primary. Anyway at this point, 5th place is likelier than 3rd. With money drying up and no momentum, Bush’s campaign will probably be done after SC, though he may take a shot at NV hoping to hit the proverbial jackpot. If he sticks around despite a poor finish, it will be nothing but a vanity effort with Bush too hobbled to have any credible chance at the nomination.

John Kasich: Kasich probably has the lowest bar of any candidate tomorrow as South Carolina has never seemed like a perfect fit, especially given the time and money Rubio and Bush have devoted to the state (full disclosure: I have donated to the Kasich campaign). I would look for Kasich to finish 5th, and it would be helpful for him to get to double digits to keep some of his NH momentum. Surpassing Bush, an outside possibility, would also help him in the expectations game. Kasich retains a narrow path to the nomination that doesn’t change much based on SC: use March 15 (a huge win in OH, strong showings/wins in MO and IL) to consolidate anti-Trump and start a big winning streak. That likely requires winning or a strong 2nd in Michigan on the 8th. To do that, I would argue he must show some viability on March 1, probably by winning or coming in 2nd in VT, MA, and maybe VA. It is a narrow path, and SC won’t derail it, but a finish above Jeb would be beneficial. One thing to watch for is a possible Governor Christie endorsement before March 1, which could bring other Governors (like MA’s Charlie Baker) on board and help Kasich score a better than expected showing on the 1st.

Ben Carson: There just is no plausible path for Carson to be the Republican nominee, and I would expect a 6th place finish, though thanks to committed supporters, there is an outside chance he sneaks into 5th. Ben Carson really seems to be this cycle’s Fred Thompson. In 2008, Thompson, who had no shot, stayed in through SC to pull votes from Huckabee and help his friend, John McCain win the state. It feels like Carson is sticking around to take votes away from Cruz, whose campaign spread a rumor he was dropping out in Iowa. By pulling over 5%, Carson does make Cruz’s life tougher, thereby helping Trump. Carson may stick around through March 1st, but if he does, it will only serve to hurt Cruz.

Ultimately, Cruz and Rubio are in somewhat precarious positions. Both need to exit SC with momentum to gain ownership of their lane. Strong showings put them in good positions to take on Trump, but weak showings could cripple them. I’m going to guess Rubio bests Cruz but both achieve what they need to. For Trump, a win solidifies his status as frontrunner, particularly if he can make it double-digits, but even a shocking loss leaves him with a path. Jeb is all but done, but Rubio needs to put him away. Carson is merely playing spoiler. Perhaps more than a strong performance of his own, Kasich is rooting for a bit softer Rubio performance to delay the consolidation of the establishment lane, making his narrow path a bit more plausible.

Of course, if these predictions are proven wrong in 24 hours, I will deny having given them. That does seem to work for our frontrunner after all…

If you like what you read, follow me on Twitter too!

Despite Cost and Blunders, GOP should stand firm on Scalia Replacement

In the aftermath of Justice Antonin Scalia’s passing, it can feel a bit crass discussing the political fallout; after all, he was a husband, father, and grand-father whose family is in mourning. However given the current balance of the court and titanic influence he leaves on legal thinking, the fact is we are entering one of most significant political battles in years, and while Senate Republicans have already made a tactical blunder, they must hold firm.

Whether you agree with his jurisprudence or not, it is indisputable that Scalia leaves behind a tremendous legal legacy. In 30 years on the court, he re-energized the textualist movement with harsh, impeccably worded dissents, groundbreaking majority opinions (ie Heller), and the occasional surprise (ie Emp Div HR OR v. Smith). Scalia is the father of much conservative legal thought, which makes the fight over his successor all the fiercer. On top of this, the Court now has 4 liberals and 4 conservatives (3 if you count Kennedy as a centrist). This means that the cases in which the Conservative wing would have prevailed 5-4 are now deadlocked 4-4. A liberal Obama Justice could feasibly swing the court to the left for years, guaranteeing the stability of Roe while endangering recent precedent on campaign finance, gun rights, and more.

Given the stakes, Senate Republicans must be very careful in how they proceed. Scalia’s death comes at an odd time. Had a vacancy arisen 5 months ago, the “lame duck” argument would be very weak, and the Senate would have been compelled to confirm a qualified nominee (elections do have consequences). If a vacancy had arisen 6 months from now, the decision not to act on a nomine would be on exceedingly firm ground as Obama would be a truly lame duck with an election right around the corner. Now, the timing of 9 months prior to the election gives credence to both arguments on whether to act or not (Kennedy in 1988 provides precedent to act while Fortas in 1968 is precedent not to act). Ultimately, this is really a new situation, unless you deem how congresses acted 50, 80, or 150 years ago to be very relevant to the present day.

With the court so evenly split, the GOP should likely delay, but the politics are bad. Republicans have only worsened the situation as well. On Saturday, Majority Leader Mitch McConnell said, “this vacancy should not be filled until we have a new president.” The Senate will not move on an Obama nominee, and the GOP almost certainly has the votes to sustain any filibuster. With 54 seats, they would have to suffer 14 defections, which is almost unthinkable, especially with vulnerable Senators up for re-election like Pat Toomey and Kelly Ayotte currently backing McConnell’s position. While the GOP should delay this until the next President, the way they are going about it is a mistake.

Republicans should have waited for Obama to formally nominate someone and then found specific reasons to oppose that candidate. Now, any specific criticisms can more easily be written off as an after the fact rationale from a bunch of obstructionists. Announcing opposition now is akin to shooting first, asking questions later. It is almost certain that the Obama nominee (whether it be Loretta Lynch, Sri Srinivasan, or someone else) will have enough flaws to justify delaying confirmation until the next President, and under the miniscule chance Obama makes a consensus choice, that nominee would deserve a fair hearing. In an effort to appease the Ted Cruz kamikaze wing of the party, McConnell has made it easier for democrats to label republicans as obstructionists and sway independents in the 2016 election.

In all likelihood, this political fight will have a limited impact on the 2016 election, but if anything, it hurts republicans. That said it can be worth losing political points when waging an important fight. The fact is few voters ever cite the nomination of Supreme Court justices as their most important issue (even though this power is one of the President’s greatest), and that is unlikely to change. It is hard to imagine more than 10% of Americans seeing this as their top issue, and such voters are likely high propensity, partisan ones. This is to say that they likely vote anyway and are not persuadable. On the margin, some democrat and some republican voters may be more energized, but they would have voted anyway. Scalia’s death may energize some voters, but it won’t swing the outcome in any meaningful way. However, this fight will make it easier for democrats to make the obstructionist argument (particularly if Ted Cruz become the nominee), which on the margins could swing some independents to the democrats. The Supreme Court does not work as a stand-alone issue to sway independents, but it can be used as part of a broader narrative against republicans. In particular, if Ayotte, Toomey, and Johnson get weak-kneed, that is a sign the political cost of this fight is growing.

Obama has every right to nominate someone, and the GOP should hold hearings for that nominee. However, there should not be hesitation to oppose him or her and keep that person off the bench given the high stakes of this vote in a divided court. The GOP should’ve waited for the nomination announcement to come out in opposition to avoid the “blind obstructionist” label, but that is water under the bridge at this point. With the Supreme Court in the balance, this is a fight worth having, even if there is a slight political price to be paid.

Justice Scalia’s guiding philosophy was driven by the goal of making the text of the law pre-eminent so that who the presiding Jude is does not matter. It is a sad twist of irony then how much of a fight there will be over who succeeds him. Equally, one is left to question the fragility of our republic that the death of one Judge can have such earth-shattering (partisans might say cataclysmic or bountiful) consequences.

 

If you like what you read, follow me on Twitter too!

Taxing in the 21st Century

Several Republican Presidential candidates (Trump, Bush, Rubio, Paul, Kasich, Jindal, Santorum, and Cruz to name a few) have outlined fairly specific tax plans aimed at accelerating U.S. economic growth. Most follow a similar pattern of eliminating deductions and lowering rates, which has worked quite well in the past (the Reagan Recovery being the standout example as seen in Chart 1). While the impulse to dust off the Reagan playbook is quite strong given the empirical data, conservatives really need to aggressively rethink how we tax and be careful not to knee-jerk back to past solutions. It is on this point where Sen. Ted Cruz’s tax plan stands out and should be applauded. While I have reservations about how the specifics of his tax plan, he has shown the greatest willingness to move away from the orthodoxy and rethink the nature of our tax code (more on his plan will follow)

Chart 1

r v o vc

With each passing day, the Reagan era grows more distant (an admitted redundancy that is still important to remember), and reflexively returning to his playbook is fraught with political danger (more and more voters were not old enough to cast a ballot for him) and policy danger. Conservatives need to do a better job delineating solutions from principles. Principles are what we believe (and as such are relatively unchanging) whereas solutions are how we implement principles (and as such change as the problems change). It is a disservice to Reagan’s legacy to simply suggest cutting marginal rates is the best answer to a slow economy as this implies there is a magic formula that would solve any problem.

The genius of the Reagan Administration was its ability to take conservative principles and apply them to policies to craft specific solutions to the problems of the day. We need to keep these principles, but today’s problems may necessitate different solutions. In brief as conservatives, we believe in returning power to the individual and away from the collective. Ultimately, individuals make better decisions regarding their own lives than a bunch of bureaucrats can hope to. This means entrusting power in the people and keeping government interference to a minimum.

Armed with these beliefs, Reagan focused his tax relief on capital. In 1981, the US was suffering from high unemployment and high inflation (stagflation). Reagan took over an economy that was treating capital poorly. As can be seen in the following chart, labor was gaining share in the economy—at the expense of capital, leading to a retrenchment in investment. There was a supply of capital crisis. When capital is treated poorly (ie 70% marginal tax rates and windfall profit taxes), holders of capital are less likely to invest it. When you don’t see capital investment, an economy grows too tight, sending prices skyrocketing (Chart 3, NB inflation is inverted). As prices soared, consumer confidence fell, leading to less spending and subsequently an even worse environment for investing.

Chart 2

obama econ

Chart 3

pce

Recognizing the supply problem the economy faced, Reagan freed up capital by rolling back regulations and focusing tax cuts on top marginal rates (bringing them down from 70% to 50% and later 28%). Reagan’s capital-aimed economic policies worked remarkably well, bringing inflation down and consumer confidence back (Chart 3) while economic growth soared (Chart 1). Reagan took conservative principles (empowering the individual rather than the collective) and applied them to the problems of the day (unfavorable policies inhibiting capital and causing an inflation shock) to create policies that bettered the lives of Americans.

Fast-forwarding to the present day, we have conservatives offering a variety of tax plans aiming to spur growth. When looking at tax plans, we need to drill down to the basics and ask the question: why we tax? The answer is simple: to fund government expenditures. There are some things government must spend money on (ie defense), and we cannot sustainably borrow money to pay for everything. Depending on the speed one wants to bring down our debt load, tax revenue likely needs to be 17.5-20.5% of GDP on average over the medium term.

It then becomes a matter of constructing a tax code that has the best impact on the economy over the medium term. In a sense, offering a tax break to one group needs to be offset by taxing another group; for instance, opting against an estate tax (which many conservatives call for) would cost revenue that needs to be made up elsewhere. On the other hand, eliminating ineffective deductions (the deductibility of corporate interest expense perhaps?) helps to fund tax breaks elsewhere. Ultimately, we would build a tax system that generates the necessary revenue while having the best economic impact, and this tax code could be dramatically different from our current convoluted mess (spoiler alert: it would be).

Most importantly, the efficient tax code would change over time because our economy is ever-changing. While conservatives should continue to push for as low of a tax burden as possible with a simple code that leaves individuals with as much power as possible, how that translates into marginal rates, deductions, and so forth can change a bit. Reagan faced an economy that treated capital poorly, and so, he lessened capital’s tax burden. Today’s economy is far different. Under Obama (as you can see in Chart 2), labor has done absolutely terrible, losing share to capital. This decline helps to explain why aggregate economic statistics (like 5% unemployment) seem out of whack with how most in the middle class feel. As such, it is critical to build a tax code that incentivizes work to get people back into the work force and working. This requires creative thinking from expanding the earned income tax credit, to contemplating the implications of a negative marginal tax rate bracket, and closing loopholes that provide little economic bang for the buck.

On the whole, it is hard to look at most of the Republican tax plans and not believe they would be better than the status quo, though none is without flaws. Most plans (like Rubio, Bush, and Kasich) stick relatively close to traditional conservative orthodoxy, but Cruz’s stands out. Cruz basically throws out the current system, has a 10% income flat tax, and a 16% business flat tax. Per the Tax Foundation, the Cruz plan costs about $3.6 trillion over a decade, but based on their view that the economy will be 13% larger (a plausible but definitely not unfriendly view), they see it only costing $770 billion. The US, in aggregate, is certainly not under-taxed, so there is nothing wrong with a tax plan that offers a moderate tax cut like Cruz’s does. I would note (that based on my rudimentary number-crunching) most of the growth driven revenue gains would be realized at the back end of the decade with years 9 and 10 generating up to $1 trillion of the incremental $2.8 trillion in revenue. Essentially, the revenue hit is not $77 billion/year, rather, it is much larger upfront and shrinks, possibly even gaining revenue at the tail end.

At first glance, it looks like Cruz provides labor with a massive tax cut, given the low 10% rate that for a family of 4 kicks in after 36k. However, his business tax would tax both profits and payrolls. So an employee earning $100,000 would pay a 10% flat tax, but his employer would also pay a 16% tax ($16,000). Under current law, the Social Security payroll tax is only 6.2%, so Cruz is really using a tax increase on payrolls to fund cuts elsewhere. Frankly relative to current law, Cruz is providing a dis-incentive to employee people.

Alongside this, Cruz would allow for the immediate expensing of equipment. Put in simple terms, buying a robot would not be subject to a 16% tax but hiring a worker would be. We continue to see a push towards automation in the economy. While painful for the worker being automated out, this is a good thing. I think we would all agree that on net ATMs have been a positive, even though they were a negative for bank tellers. Businesses should automate when the underlying economics make sense, but we don’t want decisions being made for tax purposes. An economy functions most efficiently when capital is allocated based on underlying economics and not tax implications. When taxes start changing allocation decisions, a government is picking winners and losers, which more often than not ends badly (how’d that Solyndra loan work out?).

Now, the government should not actively impede automation as this would leave the US poorly positioned in world trade and slow growth. The tax code should be neutral on the matter, and let economic reality be the determinant. Amazingly, this is one of the few things our current code does somewhat well. Employers pay a payroll tax but can deduct payroll immediately while purchases of equipment are deducted over multiple years (ignoring temporary tax breaks). When calculating the present value of the tax implications of the decision (a worker or machine), they roughly cancel out (or come fairly close), meaning that business owner would choose the economically wisest.

Cruz’s plan tilts the playing field away from workers and towards capital, incentivizing automation. Now if the pre-tax economics of hiring a worker or automating are the same, a business would choose to automate because it receives more favorable tax treatment. Interestingly, there is a pretty good case to be made that this plan would have worked particularly well in 1980 when the cost of capital was too high. Similar to Reagan’s steep marginal rate cuts, the Cruz plan would incentivize investing and have increased aggregate supply to bring inflation under control.

While Cruz’s plan benefits from original thinking, it solves past problems and would likely exacerbate the trend in chart 2 where labor has lost ground under Obama. This is one reason why I think the Tax Foundation’s growth expectations could be a bit optimistic. The Foundation does say the capital stock rises 44%, which makes sense as lower taxation would create more capital. The fact it grows 3x the economy does show the diminishing return of excess capital in the current environment. In fact, the issues with our capital stock could be dealt with more simply and just as effectively in two strokes. First, stop taxing repatriated profits at 35%, which would bring back $2 trillion. Second, Dodd-Frank has disincentivized bank lending, and as such, banks are carrying $2.5 trillion in excess cash. Roll back some of these regulations, and banks would be free to increase lending to small business and others, which would push growth faster.

Cruz (and others) are fighting the last war, focusing tax cuts in places where they will provide less growth. Reagan’s ingenuity was not that he lowered taxes but that he recognized the problems he was facing and structured his tax cuts in a way to solve those problems. Labor and capital supply an economy, and he faced a capital crisis. By fixing that, he put us on a path for 25 years of prosperity. Today, capital is doing well, and our crisis is on the labor front. Labor force participation is lower than it should be, wage stagnation is real, and capital has done fairly well with the top doing very well under Obama (who has helped exacerbate the very inequality he rails against). Again, the solution to this problem is not to punish the top to subsidize everyone else as that slows growth over time. However while Reagan tried to stimulate capital, we need to stimulate labor. This means debating a larger EITC, considering negative marginal rates, incentivizing job training, and eliminating certain loopholes (like carried interest and interest deductibility) to fund lower marginal rates. It also means keeping capital gains taxes and rethinking total opposition to the estate tax (or at least the stepped-up basis).

Reagan’s principles and the tenets of supply-side economics are as relevant as ever, but conservatives need to engage in further debate about how those principles apply to today’s challenges. The best answer could be wholesale change to the tax code (like Cruz has boldly suggested) or sticking a bit closer to the status quo. Taxes at the end of the day are a means to an end, a way to fund government while creating the conditions for the most robust growth. This requires an analysis of what breaks provide the least value and what taxes slow growth the most in today’s economy (and then eliminating those breaks to fund the elimination of those taxes!). It also requires a deeper debate on what part of the supply curve needs the stimulus. Admittedly, stimulating labor, without doing so at the expense of capital, is a challenge but not an insurmountable one (pairing labor-focused cuts with fewer deductions, a quasi-territorial corporate system, modified Dodd-Frank, and reformed estate tax is our best bet in my estimation).

Conservatives need to do a better job explaining how our principles and faith in the American people rather than government translate into solutions for today and are not merely regurgitated answers to the problems of 35 years ago. That is a pre-requisite for winning elections, and more importantly, it is the only way to actually make the American public better off. Re-examining our tax orthodoxy is a good place to start. Hats off to Senator Cruz for doing just that. While I would question the specifics of his plan, he is starting a debate we very much need to have.

Paul Ryan, Unlike Hillary Clinton, Is the Kind of Leader We Need

In the weeks after Speaker John Boehner’s announced his resignation, two facts have become clear if not irrefutable:

  1. Paul Ryan is the only person capable of getting the required 218 votes to become Speaker of the House
  2. Paul Ryan has absolutely no interest in being Speaker of the House

Now for the past two weeks, national Republicans have subjected Ryan to a full court press to become Speaker. Eventually, I suspect Ryan will capitulate because he can see as clearly as anyone else that no one else can actually do the job (reports suggest he is getting closer to “yes”). Ultimately, the country (and the Republican Party) needs someone to be Speaker of the House to keep the House from descending into total dysfunction. That said the very reason why Ryan would be such a great Speaker is the only reason why he may not be Speaker: he doesn’t want the job.

Democracy demands leaders who seek power not for personal gain but for the betterment of the nation. Voters should run, not walk, from self-aggrandizing candidates, seeking power just for the sake of wielding it. As an aside, this is a fundamental flaw in Hillary Clinton’s campaign for the Presidency. She seems to run only because she wants to be President to have her name etched in the History books rather than because she feels compelled to fix serious problems (of which we have numerous, thanks in large part to the current President). Heck when asked to explain how her Presidency would be different from Obama’s at the debate, all she could muster as an answer was that she’s a woman. If the underlying rationale for seeking the most important job on the planet is your gender, one really has to wonder if you are running to better the nation or merely to stroke your ego and wield power you have felt entitled to for years.

Politicians who seek power for power’s sake will lie, cheat and steal to attain power; they will do the same to keep it. Nixon’s Watergate and Hillary’s private server are examples of this. Unfortunately, we also see individuals who begin their careers seeking to better the country gradually succumb to the allure of power over time, trading their principles for political self-preservation; hence, the often widespread support of term limits among voters to counteract this reality.

As voters, we should not only avoid politicians who seek power for their own sake; we should also seek out politicians seeking to better the country. We are better off with leaders whom we agree with 80% of the time (or even less) but have clear guiding principles than leaders whom pander to us 100% of the time for the sake of jumping in opinion polls. If a leader can’t be trusted to be honest, that individual is unfit to serve.             That brings us back to Paul Ryan, the anti-Hillary. So much of the distrust felt towards House Leadership by the Freedom Caucus and grassroots base was the (often unfair) belief Boehner et al focused on staying in the good graces of K Street than fighting for conservative principles. Tactical disagreements quickly became a referendum on the personal character of leadership. In Ryan, we’d have a leader who doesn’t even want the job but is serving for the sake of the country. That fact gives him, and the deals he strikes, more credibility, making it easier for him to govern and lead a fractious GOP majority. Ryan can’t change the reality that Obama is still the President, but he has been offering specific, conservative solutions for longer than anyone else in the House.             Ryan leaving the Ways and Means chairmanship he so loves to assume the Speakership would be one of the clearest example of a politician putting the needs of the country ahead of personal ambitions in years. After all, he already chairs the most powerful committee in the House, which is also suited for his wonky tendencies, and is currently positioned to be the critical player in the next President’s efforts to reform our inefficient tax code. He’d be taking a thankless job where he is basically a glorified psychologist for 246 bloated egos, herding cats, and dealing with a President who has no interest in doing anything other than score political points for the next 15 months. It’s no surprise he doesn’t want the job. If anything, his path to the Presidency over the next 15 years would be complicated by becoming speaker.             We need a Congress that works for the public, prioritizing the needs of the country, and that starts with selfless congressional leadership. Ryan would fundamentally alter the paradigm of long-serving Washington insiders taking power. Instead, we would have a Speaker primarily interested in policy and in governing who has spent a decade explaining a hopeful, conservative vision for the country.

What a powerful contrast to a Democratic Presidential frontrunner who has spent years adding job titles to her resume without accomplishing much, except for finding new ways to break the laws and violate the public’s trust. In Ryan, we’d have a People’s Speaker in the People’s House.

We Need Paul Ryan

Well, it’s safe to say the House Republican Caucus has descended into total disarray after Majority Leader Kevin McCarthy unceremoniously bowed out of the Speaker’s race. While I continue to believe Boehner stepping aside was a good thing (or at least a necessary action given the loss of trust—fair or not—amongst conservative members), the situation has descended from bad to worse as seemingly no qualified candidate is interested in what may be the most thankless job in Washington.

It’s clear now that McCarthy’s horrible Benghazi remarks undermined his ability to win over skeptical anti-establishment figures like those in the self-described Freedom Caucus. Whoever the next Speaker is, he or she needs to be an adept spokesperson for the party and conservative principles. Realizing he could no more effectively govern than Boehner has, McCarthy did what was best for his country, institution, and party by stepping aside.

Now, it is a question of who steps forward to lead what often seems to be an ungovernable caucus that is now suffering from virtually unprecedented internal strife (if not civil war). The tension between the establishment and right flank of the caucus has been building for years, especially since the ill-fated shutdown of 2013 that achieved nothing. The establishment sees the “conservatives” as uncompromising idealists who fail to bend to political realities while the “conservatives” see the establishment as wimps unwilling to fight for campaign promises. Both sides are partly right and partly wrong.

Until the party can unify, chaos will persist, but these divides are bridgeable. Most of these intra-party disputes revolve around tactics not policy (ie virtually all republicans want to defund Planned Parenthood, the question is how best to go about it). We need a Speaker who has the support of the establishment and the trust of conservatives. Conservatives saw in Boehner (and by extension McCarthy) a leader unwilling to fight; again whether this is fair or not is almost irrelevant because perception becomes reality. By losing the trust of conservatives, he lost their buy-in on key measures, making it impossible to have any leverage in negotiations with Democrats.

Given the sheer duration of this intra-party battle, few members have the capacity to earn the support and trust of all GOP representatives, which is why Paul Ryan needs to step up and lead. Ryan has proven himself to be a thoughtful policymaker with a bold vision of what a conservative America can look like as witnessed by his budget plans. Ryan has the ability to maintain the support of the “Boehner core” while winning the trust of the anti-establishment to negotiate seriously with the President.

Ryan’s conservative bona fides are all but untouchable with budget plans that have shaped the core of conservative fiscal thinking, and he also has the proven ability to cut a deal when necessary as he did with Senator Patty Murray to partly deal with sequestration. He is the man best positioned to unify and lead the party—in fact with the possible exception of Trey Gowdy it is unclear to me any other House member could build the necessary support to be Speaker. Plus, despite some suggestions to the contrary, the idea of selecting someone who isn’t a member of Congress as Speaker is short-sided. What does it say about a party that has over 240 members and can’t find a suitable person to lead; having an unelected individual be the face of the party is politically perilous.

Sadly, it is clear Ryan does not want the job and would prefer to stay Chair of Ways and Mean, a perch from which he can negotiate tax reform with the next President. Plus, becoming Speaker would require significant personal sacrifice, keeping him from his family as he has to fundraise and campaign for fellow members. However, at this moment, this country needs Ryan as Speaker so that we can have a Congress that functions to some degree. As Speaker, Ryan would still be heavily involved in tax reform and any other major policy initiatives. Plus, the Republicans will likely maintain control of the House through the 2020 election, meaning Ryan could easily be Speaker for north of 7 years (if not longer), which would give him the ability to shape the course this nation takes to a larger degree than as a committee chair. Since he is only 45, he could be a major force in DC for quite a while and still have a plausible path to the Presidency, should it interest him.

America and Republicans need Paul Ryan, and while the personal and family sacrifices are real, I hope he is able to find a way to “yes.” At the moment, republicans look like buffoons, and should this continue, 2016 election prospects could start to dim. After all if the GOP can’t even pick a Speaker, how can we expect voters to entrust us to govern the country? The Republicans still have a chance to steal a victory from the jaws of a humiliating defeat if we can find a Speaker whom the caucus will follow. Given his ability to articulate a conservative vision, unify the caucus, regain the trust of conservatives (both in the Caucus and in the Grassroots), and work with Democrats when necessary, Paul Ryan is the best if not the only choice for Speaker.

Representative Ryan, your country and your party are clamoring for you. Please say yes.

Boehner Must Go

While exiting the Presidential race, Wisconsin Governor Scott Walker called on others to step aside and allow the field to narrow. Sometimes, the best thing a leader can do is step away and let someone else step forward. While I doubt many Presidential contenders will be heeding Walker’s call, I hope Speaker John Boehner does. The time has come for Boehner to go.

Once again, we stand at the precipice of a government shutdown (a mere nine days away), and Boehner seems paralyzed, unable to find a compromise that could appease his conservative critics while netting Obama’s signature. This is a situation Republicans repeatedly find themselves in as deadlines approach—forced to fold at the last moment or risk politically unpopular shutdowns instead of crafting some sort of tenable strategy. Now in many ways, I feel sympathy for Boehner. There is a group of around 30 uncompromising republicans (known as the Freedom Caucus), constantly causing him problems. He is then forced to grovel for Democrats’ vote to pass bills the President will sign. It truly is an unenviable job. However, it is a job best suited for someone else.

For a leader to be effective, he or she needs buy-in from the troops. A great plan only works when those who have to execute on it believe in it. Great leaders from Churchill to Patton to Martin Luther King earned and built respect, loyalty and trust amongst their soldiers, citizens, and followers. Without that, even the most well thought-out plans are doomed to failure. This is where the rationale for a continued Boehner speakership collapses. Boehner does not face an ideological deficit; he lacks trust, primarily over tactics. Boehner has a history of being opposed to abortion and Planned Parenthood, of opposing Obamacare (those who doubt his conviction should re-watch his moving speech opposing passage as Minority Leadership), and supporting fiscal sanity.

Boehner wants to separate the Planned Parenthood funding issue from keeping the government open, and Freedom Caucus members recognize that once separated out, President Obama will veto an effort to defund Planned Parenthood if the Senate is able to move on it (unlikely). By the same token, attach it to a continuing resolution, and Senate democrats or Obama again block it, shutting down the government. In reality, the Democrats are responsible for shutting down the government to keep open an organization in the business of brutally ending the lives of potential human beings to sell the body parts for profit. However, the media will blame republicans—that is unfair but is the reality of the world we live in. Plus given our push for smaller government, shutdowns (which are politically unpopular) tend to be blamed on republicans by voters. Heading into a critical election year, the GOP cannot afford too much of a hit to its brand and will be forced to cave, reopening the government and funding Planned Parenthood after a few days or weeks.

This is the problem of the Boehner speakership. He says the right things but is unable to accomplish almost anything. After winning re-election in 2012, Obama had no incentive to work with republicans. It has left me wondering what the point of winning control of Congress was. Since 2013, has Boehner been able to push through a single significant conservative priority? No. Anything would be vetoed by Obama, even after republicans retook the Senate. Seemingly, the only value in controlling congress is blocking Obama from doing bad stuff, but as showcased by the enactment of the Iran deal, Republicans don’t even wield that power particularly well!

Now, some conservatives can be guilty of over-promising; for instance, it was disingenuous of Senator Cruz to argue that shutting down the government would lead to the repeal of Obamacare. No President is going to repeal their signature law. However, Boehner has been unable to craft a strategy to net any major victories. His ineptitude has cost him the trust of several dozen members, and with the House GOP divided, there is even less leverage when dealing with Obama.

Fighting over government shutdowns is risky business, and conservatives should focus their battles elsewhere. Controlling congress can limit the damage an incompetent President can do, but when he is unwilling to compromise, congress alone cannot accomplish much. This reality underpins how critical the 2016 election is; to achieve conservative objectives and not merely block liberal ones, we need to win back the White House. Election pledges that all we needed was a Republican congress to reset the course of the nation have been proven patently false.

As such, John Boehner has lost the confidence of many members and the public. Since Obama’s reelection, he has been unable to achieve any meaningful goals and has been consistently outmaneuvered by democrats, leaving the party only days away from government-funding deadlines. Rather than trying to craft an intelligent alternative (ie suspend the $528 million in PP funding pending an investigation of their activities and allocated $1.5 billion to responsible providers of women’s healthcare, thereby forcing Obama to turn down an extra billion if he wants to support this horrible organization), he has left the party in a no-win situation: either be blamed for a government shutdown and eventually cave or fund Planned Parenthood.

It is time for Boehner to do the right thing for party and country and step aside. The House could pass a short-term (3 month) continuing resolution and find a Speaker whom both conservatives and moderates can trust to act principally with strategies that can actually deliver small victories (conservatives need to be realistic about the chance for major policy victories in the final year of Obama’s Presidency). I would suggest someone like Paul Ryan or Tom Price with conservative credibility, gravitas, and an ability to keep the House operating. We need a leader that members can trust; members like Ryan and Price have already earned that trust unlike Boehner. Switching leaders would go a long way towards reunifying the Republican caucus.

John Boehner has served his country well and should be respected for his service, but now is the time for new blood. He has failed to deliver any conservative victories, has a mixed record in terms of blocking Obama’s agenda, has lost credibility amongst a growing portion of the caucus, and has failed to devise any strategy to get things done without butting against politically unfriendly deadlines. Having to scrounge for Democratic votes is not a plausible strategy for the next 16 months. Instead, we need a Speaker whom conservatives can trust to employ the proper tactics and still keep the House in order. Boehner is no longer that Speaker. It is time for a fresh face.